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Head Note

Civil Law  - Debt Recovery

Government Grants Act, 1895 - Debt Recovery - Mortgage Lease Expired - Property in question governed by the Act, 1895 and Nazul Rules - It was given on lease by the State of U.P.to Mrs. 'M' and second time the lease was renewed in favour of Ms. 'V' and Ms. 'L' for a further period of 50 years which was valid up to 31.8.2023 - During the subsistence of lease, the leasehold interest was transferred in 1945 in favour of ABP Co. and on the basis of the said transfer a lease was executed in 1949 by the State of U.P. in favour of ABP Co. for the remaining period of lease which expired in 1987 - As against the loan taken by the Company from the Bank, a mortgage was created in respect of the property by the Company in favour of Bank - The lease in respect of the leasehold interest in the property admittedly expired in 1987 - The mortgage so created by the Company in favour of the Bank in respect of Nazul land without the sanction of the State of Uttar Pradesh in terms of the lease, is ab initio void, hence no right was created in favour of the Bank by reason of the said mortgage - Consequently, a mortgage decree obtained by the Bank on the basis of settlement, in absence of and behind the back of the State of U.P. could not have been enforced against the State -Subsequent proceedings of transferring the decree to the Debt Recovery Tribunal and again passing an order for auction sale of the property on the basis of settlement is wholly illegal and without jurisdiction - The appellant Bank has no right, title or interest in the property so as to claim a right of conversion of the property into a freehold property - Impugned notice issued by the State of U.P. directing resumption of the property is legal and valid and cannot be quashed at the instance of the Bank.

Constitution of India, 1950  - Article 14

Doctrine of Legitimate Expectation - It ordinarily would not have any application when the legislature has enacted a statute - The legitimate expectation should be legitimate, reasonable and valid - For the application of doctrine of legitimate expectation, any representation or promise should be made by an authority - A person unconnected with the authority, who had no previous dealing and who has not entered into any transaction or negotiations with the authority cannot invoke the doctrine of legitimate expectation - A person, who bases his claim on the doctrine of legitimate expectation has to satisfy that he has relied on the said representation and the denial of that expectation has worked to his detriment.

Constitution of India, 1950  - Article 14

Doctrine of Legitimate Expectation - State never recognized the appellant Bank as a mortgagee - Further the State was not aware about the alleged mortgage said to have been created by the lessee ABP Co. by deposit of Lease document - Moreover, the State never represented or promised either to the lessee or to the Bank to give any benefit under the lease - In such circumstances the High Court has committed grave error in applying the doctrine of legitimate expectation in favour of the bank.

Topic(s)-Bank has no right ,  title or interest in the property so as to claim a right of conversion of the property into a freehold property.